2015 (11) TMI 1601 - ITAT KOLKATA

2015 (11) TMI 1601 - ITAT KOLKATA - TMI - Addition on cash deposits in undisclosed bank balance - Held that:- The discretion has been conferred on the Income tax Officer u/s 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. The Income Tax Officer is not obliged to treat the value of investm .....

in this case in respect of both cash as well as cheque transaction contained in the said bank account by verifying the veracity of the figures worked out by the assesse and bring to tax the same.
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Thus we direct the AO to assess the peak credit being a sum of ₹ 1,01,40,000/- as computed by assessee on the basis of deposits made in these six bank accounts with Axis Bank Ltd. in lieu of cash deposits added by the AO at ₹ 83,48,16,130/-. Accordingly, the AO will verify the peak and .....

s framed by ITO, Ward-25(2), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for AY 2009-10 vide its order dated 28.12.2011. 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO being cash deposits in undisclosed bank balance at ₹ 83,48,16,130/-. For this, assessee has raised following ground nos. 2 and 3: 2. For that in the facts and circumstances of the case the Ld. CIT(A) erred in confirming .....

Bank Accounts maintained with 2/1A, Lansdown tower, Sarat Bose Road, Kolkata-20 during the FY 2008-09 relevant to this AY 2009-10.The AO during the course of assessment proceedings required the assessee to prove the source of such huge cash deposits and in response, assessee filed a voluntary disclosure petition dated 01.11.2011 wherein he worked out the peak of ₹ 1,01,40,000/- on the basis of his deposits in the following six bank accounts: (i) 411010100011307, (ii) 411010100011316, (iii) .....

,16,130/- have been made in the said accounts. During the entire period Sep, 2008 to 31/03/2009, not a single rupee has been withdrawn by the assessee/account holders from these eleven accounts. Hence, the assessee's contention of working a peak of cash credits cannot be accepted as there are no withdrawals at all. The deposits being a one-way affair can only be totalled to ascertain the sum total of cash deposits made by the assessee. The entire amount of Rs,B3,48,16,130/- from these eleven .....

main director controlling the six Pvt. Ltd. companies. The assessee has been highly secretive in not revealing the details of the investments made by him from the said cash deposits. The money has been all along in his control right from the stage of deposits in the eleven savings bank accounts to the stage of receiving the same as a director of the six Pvt. Ltd. companies. As per the details obtained from the ROC, the said six Pvt. Ltd. companies have not disclosed their account with the Axis B .....

ce of the cash deposits. Thereafter, the Assessing Officer conducted enquiry U/S 133(6) of the Act and it was detected by the Assessing Officer that the appellant was operating eleven savings bank accounts with the Axis bank. In respect of six bank accounts the total deposits was found to be ₹ 53 crores. However, total deposits in the entire eleven bank accounts was found to be ₹ 83,48,16,130/-. The Assessing Officer again asked the assessee to explain the source of these cash deposi .....

ording to the assessee. However, the assessee remained silent on the remaining five bank accounts. During the appellate proceedings also same submission has been made as made before the Assessing Officer. Having considered the submission of the appellant I find that the appellant has been very secretive and he has not disclosed the true and correct facts. He has not explained the source of cash deposits in the eleven bank accounts operated by him. It is seen from the assessment order that the as .....

ded, I am of the considered view that the Assessing Officer has given cogent reasons as to why the assessee's submission is not acceptable. Finally, the CIT(A) also rejected the peak credit theory of the assessee and confirmed the addition as made by AO of ₹ 83,48,16,130/-. Aggrieved, now assessee is in second appeal before us. 5. We have heard rival submissions and gone through facts and circumstances of the case. We find from the facts of the case that the assessee has deposited cash .....

vestment in bank i.e. cash deposits made in these six bank accounts and added to the returned income of the assessee in total. The assessee now before us claimed that he is engaged in the business of providing accommodation entries and for this he placed reliance on the statement recorded by the AO u/s. 131 of the Act on 13.12.2011 wherein he explained the modus operandi of his business. The relevant statement reads as under: In view of the above statement the assessee claimed that he is engaged .....

by assessee and particularly pages 1 to 41, wherein extract from bank statement of six undisclosed bank accounts of Axis Bank and calculation showing peak credit after consolidation is enclosed. There is no dispute about the cash deposited in these six bank accounts maintained with Axis Bank Ltd. We find from the above statement recorded by the AO of the assessee particularly Question nos. 14 and 15 that assessee is only a conduit in a big syndicate of accommodation entry providers and he has e .....

ese six bank accounts have been transferred to Maple Advisory Services Pvt. Ltd. and in turn Maple Advisory Services Pvt. Ltd. has further transferred this amount to six Private Limited Companies namely, Gokul Distributors, Indigo Commotrade, Jupiter Tradelink, New Era Commotrade, Swift Distributors and Zenith Management and all these private limited companies are having their bank accounts in the same bank branch. This modus operandi clearly reveals that the assessee is merely an accommodation .....

sessee apart from his regular income had a bank account with Central Bank of India which was used by him only for the limited purpose of providing accommodation entries to various parties. Initially the assessee took a stand that he was deriving finance commission @.25% of all the transactions in the accommodation entry business and offered the same to tax., However, he shifted his stand by accepting the peak credit theory before the ld. CIT(A). This is evident from the fact that he had not pref .....

proved by the assessee by mentioning the names, addresses, PAN, confirmation of the parties to whom the payments were made and from payments were received by the assessee. Hence it is proved that transactions contained in the bank account are not genuine. Once the transactions in the bank account are proved ingenuine then it is an accepted practice of adopting the peak credit theory for the purpose of determination of undisclosed income of the assessee. Hence, reliance placed by the ld. DR in t .....

But in the facts of the instant case, the assessee had clearly owned up the transactions and that he is engaging himself in accommodation entry business with his own funds as well as funds received from parties to whom the accommodation entries are provided by the assessee and the names and addresses of such parties could not be provided by him for want of maintenance of books and details. This goes to prove that the genuineness of the transactions contained in the accommodation entry business a .....

r evidence on record to prove that the withdrawals made by the assessee from the said bank account having utilized for making any other investments outside the books or meant for any other purpose other than for accommodation entry business. It is pertinent to look into the decision rendered by the Kolkata Tribunal in the case of Mahesh Kumar Gupta in IT(SS)A. No.11/Kol/2014 dated 0.2.2005 wherein ITAT observed that the claim of the assessee was that the cheque withdrawals were for giving loan f .....

664 with the Syndicate bank. Reference may also be drawn to the decision of the Hon ble Apex Court in the case of CIT vs Smt. P.K. Noorjehan reported in 237 ITR 570(SC) wherein their lordships have held that mere unsatisfactoriness of the explanation offered by the assessee, does not, and need not, automatically result in deeming the value of investment to be the income of the assessee. That is still a matter within the discretion of the officer and, therefore, of the Tribunal. In other words, t .....

nce it would be unreasonable to tax all the deposits in the bank account of the assessee. To this extent, we do not appreciate the action of the ld. AO in taxing the entire credits of ₹ 6,30,89,413/- as undisclosed income of the assessee for A.Y.2006-07. To put this ongoing dispute to rest, in the interest of justice and fair play, we direct the ld. AO to assess the peak credit in this case in respect of both cash as well as cheque transaction contained in the said bank account by verifyin .....